'The Latvian economy has entered a new cycle and the spending euphoria is over,' says the Property Secrets Latvia Market Performance report.
The property sector in Latvia is suffering from the same kind of problems as other markets worldwide including higher interest rates as a result of the credit crunch. Banks are also starting to apply higher margins as lending has become more expensive.
'Following on from this, mortgage lending is now less attractive than it was a year ago and is not able to support the price growth any more. Lower affordability of locals is mirrored by a stagnant and/or a falling in value market,' the report continues.
The report predicts that there is unlikely to be a surge in demand for property in the capital city, Riga. 'Demographics in Riga are, in general, unfavourable to support further growth in the housing market,' it says but also points out that the fact that as around 23% of the population is in the household formation age of 20 to 34 there is some potential for further housing demand.
The overall conclusions are pessimistic for those wishing to sell in Latvia but this also means that long term property investors could find some bargain prices.
'Riga is currently a buyers' market and selling is not the best option at the moment. Renting might be difficult as well, due to the oversupply. The only investment strategy at the moment is to reduce the price by up to 15% and try to exit the market,' it says.
'However, if an investor bought at the beginning of the growth curve, his property was likely to have increased by at least 30 to 50% in value. Selling with a reduced price now might still bring some profit.'
